Tuesday, May 17, 2016

One standard way for employers to get around overtime pay (and perhaps even minimum wage requirements) for their employees has been to treat them as salaried employees rather than hourly employees who are subject to minimum wage and overtime pay rules. Recognizing this, the Labor Department had previously set a threshold for salary incomes below which the overtime pay rules would be triggered. However, until now, that threshold has been a pathetic $23,660.00. Now, that threshold will be increased to $47,476. Expect shrieks and screams from Republicans and those who want to bring back the bad old days of the falsely named Gilded Age. A piece in Huffington Post looks at this change that may positively impact millions of Americans. Here are article highlights:

The Labor
Department announced Tuesday that it completed one of the most ambitious
economic reforms of the Obama era, finalizing a new rule that will extend
overtime protections to millions of additional workers.

The
administration will accomplish that by raising what’s known as the overtime
salary threshold. Nearly all workers earning salaries beneath that threshold
are entitled to time-and-a-half pay whenever they work more than 40 hours in a
week.

The current
threshold is just $23,660. The White House will be doubling that number, to
$47,476, guaranteeing overtime rights for salaried workers earning less than
that. The Labor Department will now update the threshold every three years to
make sure it keeps pace with inflation.

The White House
estimates that the change will bring overtime rights to 4.2 million workers who
are currently excluded. It will also clarify eligibility for another 8.9
million workers who may or may not have overtime protections under the current
rules, officials said.

On a call with
reporters Tuesday, Labor Secretary Tom Perez said the reform was meant to
address “both underpay and overwork.”

With
a minimum wage hike blocked on Capitol Hill, expanding overtime was the most aggressive way for the Obama
administration to raise wages for private-sector workers. The White House is
making the reforms through the executive rule-making process, under the Fair
Labor Standards Act. It doesn’t need congressional approval to do so, although
Republicans may still try to block the reforms through the appropriations
process.

Passed during
the Great Depression, America’s overtime law was meant to protect workers from
being worked too long and paid too little. The rules guarantee that workers get
paid extra when they work extra. The rules also discourage employers from
working employees long hours by making it more expensive to do so, through a time-and-a-half
premium.

But under the
current regulations, many working-class employees who earn above the low salary
threshold are classified as “managers” and therefore don’t have overtime rights.
Employers have an incentive to pile work onto these employees, since their
extra time essentially comes for free. As a result, in retail some store
managers will clock 60, 70 or even 80 hours, but only take home a modest salary
in the $30,000 range.

In 1975, 62
percent of salaried workers had overtime rights; now, that share is a mere 7
percent, according to White House estimates. “And you wonder why the middle class is
struggling,” Vice President Joe Biden said Tuesday. “If you work overtime you
should actually get paid for working overtime.”

“Overworked and
underpaid managers, postdoctoral researchers, social workers, insurance claims
workers, and many others will have their lives improved one way or another by
this rule,” said Eisenbrey, who was one of the most vocal voices for the
reform. “It’s great to see the government doing something significant to help
the struggling middle class.”

EPI estimates
that the effects could be greater than the White House anticipates. The group
projects that 12.5 million workers will “directly benefit” from the new rules —
slightly more than half of them women, and a disproportionate share of them
African-American and Hispanic. The biggest effects will be felt in the South,
where a larger share of workers are carved out of protections under the current
rules.

Business groups
lobbied hard against the new rules, claiming they would lead employers to cut
back on hours, and force workers to start tracking their time as hourly
employees. What the rules will undoubtedly do is give many employers a hard
choice: Either limit workers’ hours to 40 per week so they don’t incur the
time-and-a-half premium, or start paying workers more for the extra time they
work.

What Republicans and business groups seem to never contemplate is that if workers have increased income, they will spend much of it in the marketplace and boost the economy - and the demand for goods and services. It is not a zero sum game. I can think of many law firms and title companies that may need to revisit their wage practises.

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Out gay attorney in a committed relationship; formerly married and father of three wonderful children; sometime activist and political/news junkie; survived coming out in mid-life and hope to share my experiences and reflections with others.
In the career/professional realm, I am affiliated with Caplan & Associates PC where I practice in the areas of real estate, estate planning (Wills, Trusts, Advanced Medical Directives, Financial Powers of Attorney, Durable Medical Powers of Attorney); business law and commercial transactions; formation of corporations and limited liability companies and legal services to the gay, lesbian and transgender community, including birth certificate amendment.

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